Despite the sharp slide in China’s production and investment in April, there were some sharply divergent trends in output by industry.
For example, crude steel production – the figure along with iron ore, coal and LNG import data of great interest to Australia – increased strongly.
In fact, it jumped 12.7% from a year ago to hit a new all-time high of 85 million tonnes. the previous high was 82.55 million tonnes in October 2018.
Cumulative crude steel output increased by 10.1% to 314.96 million tonnes in the January-April period.
And remember that was on a fall in iron ore imports in April to an 18 month low of 80.7 million tonnes and in the January-April period when they dropped 3.7% to 340.21 million tonnes.
The National Australia Bank also pointed out that Consumer electronics production also increased strongly, in April, rising 12.4% from a year ago.
“There were more modest increases in other parts of heavy industry. Cement output rose by 3.4% YoY, while electricity production increased by 3.8% Yoy (down from 5.4% previously).
“Motor vehicle output fell by 15.8% yoy in April – with auto sales having fallen since the second half of 2018 due to tighter credit availability (particularly in the shadow banking sector),” the NAB pointed out.
Real estate investment grew at a solid pace of 11.9% in January-April (unchanged from January-March) compared with a 9.5% growth in the first four months of 2018.
New project starts grew by 13.1% in the first four months of the year.
Construction consumes more than 60% of China’s steel output and the strong growth will help offset the slide in demand from car makers.
A strong real estate sector will continue to offer strong support for steel and iron ore prices in the near term, much as it has done since 2016.
Real estate sales declined by 0.3% in area terms in January-April but was up 8.1% in yuan terms, indicating a sharp jump in property prices in local currency.
Economists say that is positive for future project starts and steel demand. Housing inventories fell by 9.4% on the year in area terms which would indicate there is not a backlog of properties overhanging the market.